Of course the UK gambling market has grown in the period between 1999 to 2018. In fact it has grown by £7.0bn, or 85% – which sounds like a lot. However, there are two important caveats to this data. The first is basic but often misunderstood by wider stakeholders. The GB Gambling Commission only started fully regulating landbased gambling (and lotteries) in 2007 – when officially collated revenue records began (though a combination of listed company data, Companies House filings and HMRC/HMT data allows us to build a pretty accurate picture of what went before). But the Gambling Commission only started domestically regulating online gambling for a part period in 2014-15, which is when online data is added to the official industry statistics. So if we compare total official revenue in 2007-8 with total official revenue for 2017-18 we are comparing landbased only to landbased + online. In 2008, online was already a c. £1.35bn revenue market (bigger than bingo and casino). So in the period 2007-8 to 2017-8, the UK gambling industry did not grow by 76% (5.8% CAGR), but by 52% (4.3% CAGR). Those that prefer a good story to solid figures might think we are splitting hairs here – both look like big numbers. But one isn’t.
Growth of 52% over ten years sounds like a lot. But the economy has also grown a lot over ten years. Household Disposable Income growth over the same period was 36% or 3.1% CAGR. The gambling industry over the last decade has therefore outstripped consumer spending power by a material but not all that significant 1.2ppts per annum. In other words, the proportion of disposable income that British consumers are spending on gambling has moved from 0.95% in 2008 to 1.06% in 2018 – hardly an explosion, even factoring in a (lottery-led) reduction in the overall player-base.
But even this is not the complete story. 2008 was the last ‘good year’ for the British consumer before the financial crisis became widespread recession: in 2009-11, HDI growth fell from a previous average of 4.5% p.a. to just 1.9%: materially below the prevailing headline rate of inflation (3.0%) and so a real-terms decline in living standards. 2008 was not that great a year for gambling, however (other, notably, than bookmakers – likely benefiting from substitution). Landbased gaming sectors were still reeling from the Smoking Ban (H2 2007) and the loss of S16/21 machines (similar to FOBTs; Q4 2007): the aggregated revenue change for casinos, bingo, arcades and machines in pubs was -13% or nearly £500m lost (i.e. a shock broadly similar in magnitude to the B2 ban given inflation, but more widely felt). Growth was even spluttering somewhat online (up ‘only’ 8.5% in 2008), in the gap between heavy user adoption of a relatively poor desktop product (with limited to no mass market appeal) and the broadband / in-play / mobile / advertising growth drivers that powered the sector from 2010 onward. Therefore – and optically very importantly – the official data (April 2008-9) starts at a trough in overall gambling spend combined with a cyclical peak in consumer spend.
If we go back another decade, we find overall gambling spend averaged a fairly resilient 1.1% of HDI, before the public health and regulatory changes of 2007 uncoupled this and brought it down to 0.91% (2009 was the trough: negative regulatory change + recession = bad news for gambling). Therefore, what online has done between 2010 and 2018 is not grow gambling to new highs, but allowed it to normalise some way back to pre-recessionary and regulatory impact (which, significantly, were not designed to cut gambling demand levels at all). Indeed, to get back pre-recessionary equivalent levels of consumer spend / sector revenue, gambling would need to add another £1.4bn – an additional nearly 10% of the current industry total, and then grow with at least inflation.
We have included lottery in the total since regular draw-based and scratchcard consumption is not all that dissimilar from the occasional flutter in value or frequency terms, while very regular multiple draw-based participation and scratchcard use is at least fungible with a Saturday acer and a few in-play bets on big games/races or a couple of trips to the casino/bingo hall: the extent of most people’s gambling involvement, if not the source of most revenue. Nevertheless, there is a case to be made for lottery being ‘different’ on a number of levels (not run commercially, core draw-based product specifically not built around rapid play, much higher tax and good cause elements). However, if we strip out lottery and consider only commercial gambling, the picture doesn’t change all that much: from 1999 to 2006 the average proportion of HDI spent on commercial gambling was 0.79%, peaking at 0.82% in 2005 and 2006; from 2009 to 2018 it was 0.73%, reaching 0.82% again in 2017, but now in relative decline again (from a recessionary low of 0.66% 2009-2010) – so the same pattern of land-based regulatory and recessionary relative decline, followed by a decade to recover – but to only pre recessionary levels (and commercial gambling spend in 2019 will be some way off 2017 relative highs, given likely absolute revenue decline, causing a fall back down to c. 0.75% – see below).